Starbucks Case

Starbucks: Delivering Customer Service

Case Study, BEP 430 Marketing

20030059 Dong-ock Kim1, 20030071 Min-geuk Kim2, 20040054 Keehyung Kim3,

20040535 Yohan Jo4, 20076006 Huang Qiuling5, 20076035 Dorjsuren Bayarmaa6

Marketing Team A1 2 3 4 5 6

erst_licht99@hotmail.com1, kmg0702@hanmail.net2, keehyoung@gmail.com3,

zukjimote@gmail.com4, sharlin_huangqiuling@hotmail.com5, gordok_88@yahoo.com6

Professor: Wonjoon Kim

Date submitted: May 7, 2007

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TO: Day, vice president of administration in North America, Starbucks

FROM: Dong-ock Kim, Min-geuk Kim, Keehyung Kim, Yohan Jo, Huang, Qiuling,

Dorjsuren Bayarmaa

RE: Starbucks: Delivering Customer Service

DATE: May 7, 2007

Market Analysis

Starbucks provides the highest-quality coffee what it believes in the world. It

has hundreds of product lines and the sales of beverage take the largest percent. Despite

of Starbucks' overwhelming presence and convenience, customers think there was just a

little of image and product differentiation between Starbucks and the smaller coffee

chains. However, Starbucks has an uncomplicated distribution strategy, and it tries to

make customers get entrance to Starbucks products easier and provide more

convenience to customers. Moreover, it has company-operated stores located in hightraffic

and high-visibility and non-company retail channels. In addition, Starbucks has

four major competitors. Minneapolis-based Caribou Coffee which provides the look and

feel of an Alaskan lodge has more than 200 stores in nine states. California-based Peet's

Coffe&Tea - the freshest coffee is its strategy - has about 70 stores in five states. Others

are Independent specialty coffee shops which offer beer, wine, liquor, satellite television,

and internet-connected computers and, Donut and bagel chains like Dunkin Donuts

offering flavored coffee and non-coffee alternatives.

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For product innovation, new products were launched on a regular basis. For

service innovation, Starbucks has launched Stored-Value Card (SVC) and T-Mobile

HotSpot wireless Internet service. In addition, the expanding strategy was to open stores

in new markets while geographically clustering stores in existing market. Furthermore,

the cost of cannibalization covered by total incremental sales associated with

concentration.

Evaluate Starbucks' Plan

It is a good idea to make customers feel like valued customers with faster

service with more labor. As you said, it just makes about 7 penny loss a share. However,

it is a minor loss of share, and there are some problems in the $40 million plan. First of

all, it is too large amount of money to spend for small factor. Secondly, there is another

way to satisfy customers.

Every $40 million per year is quite a huge amount of money. The net income of

Starbucks was $151.4 million in 2001 and $215.1 million last year, so it will have risks

about no growth in net income next year. Moreover, it is unsure if it would be

successful. Starbucks is trying to reduce consumers' waiting time continuously.

However, there has no successful reduction. Furthermore, in 2002, waiting time of

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Starbucks was just 3.10 minutes, so we cannot assure every customer will be satisfied

with 3 minutes.

Finally, we suggest another plan which is more efficient. There are 19% of

customers who responded that they would feel like valued customers when they could

get free coffee after every x visits. Through the calculation [Appendix 1], free cup after

every 10 times-visit can make more efficient results. Furthermore, friendlier staff can

make 19% of customer satisfaction, so education of staff can be a better idea.

3Fs Recommendation

We have made 3Fs recommendation for Starbucks: Friendly staffs, Free drink

service, Friendly environment.

For the 'Friendly staffs', we can use methods of evaluation and education. From

the survey of customers' satisfaction, friendlier staff is the most important part that can

make customers feel like valued customers. Therefore, evaluation and education would

be a good solution.

Evaluation can be done by both staffs and customers. There are some standards

like Appendix 2. After evaluation, Starbucks can educate poor partners and award the

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best partners. Because it just needs some papers with pens and money for educators,

customers' satisfaction rate would be higher with low cost.

There are two types for free cup service. One of them is a free cup after x

number of visits. In "Valued